CHCP Real Estate Transactions & Documentation 2 — Questions and Answers
Question 1: A buyer wants to cancel a purchase agreement due to an unsatisfactory home inspection. Which clause specifically grants them this right?
- Acceleration clause
- Inspection contingency (Correct answer)
- Subordination clause
- Defeasance clause
Correct answer: Inspection contingency
An inspection contingency allows buyers to cancel or renegotiate if the home inspection reveals unacceptable conditions.
Question 2: What document transfers the seller's rights and interest in a property to the buyer at closing?
- Promissory note
- Deed of trust
- Deed (Correct answer)
- Title commitment
Correct answer: Deed
A deed is the legal instrument that conveys ownership (title) from the seller to the buyer.
Question 3: Which federal law requires lenders to provide borrowers with a Loan Estimate within three business days of a loan application?
- RESPA
- TILA-RESPA Integrated Disclosure (TRID) (Correct answer)
- ECOA
- HMDA
Correct answer: TILA-RESPA Integrated Disclosure (TRID)
TRID (the TILA-RESPA Integrated Disclosure rule) mandates delivery of the Loan Estimate within three business days of application.
Question 4: In a real estate transaction, what does 'proration' at closing typically address?
- Division of the broker's commission between agents
- Allocation of recurring costs like taxes and HOA fees between buyer and seller (Correct answer)
- The lender's origination fee split across loan payments
- The escrow company's fee schedule
Correct answer: Allocation of recurring costs like taxes and HOA fees between buyer and seller
Proration allocates ongoing expenses such as property taxes, HOA dues, and prepaid rents between buyer and seller based on the closing date.
Question 5: A 'chain of title' examination is conducted primarily to:
- Verify the physical boundaries of the property
- Confirm the property's current market value
- Identify any breaks or defects in the history of ownership (Correct answer)
- Determine the outstanding mortgage balance
Correct answer: Identify any breaks or defects in the history of ownership
A chain of title review traces consecutive transfers of ownership to ensure there are no gaps, conflicts, or defects that could cloud title.
Question 6: Which type of deed provides the greatest protection to the buyer by including covenants against all defects arising before and during the seller's ownership?
- Quitclaim deed
- Bargain and sale deed
- General warranty deed (Correct answer)
- Special warranty deed
Correct answer: General warranty deed
A general warranty deed warrants title against all defects for the entire history of the property, not just the seller's period of ownership.
Question 7: At closing, the 'right of rescission' under TILA allows a borrower to cancel which type of loan within three business days?
- A purchase-money first mortgage on a primary residence
- A refinance or home equity loan on a primary residence (Correct answer)
- Any commercial real estate loan
- A VA or FHA purchase loan
Correct answer: A refinance or home equity loan on a primary residence
TILA's three-day right of rescission applies to refinances and home equity loans on a primary residence, not to purchase-money first mortgages.
CHCP Real Estate Transactions & Documentation 2
A buyer wants to cancel a purchase agreement due to an unsatisfactory home inspection.
Which clause specifically grants them this right?